|Category: ||Affordable Loan Products, Community Impact, Organizational Development, Partnership-Building
|Keywords: ||Business Lending, Community Economic Development, Community Impact, Economic Impact, Partnerships with Government
|Information About Organization:|
|Name: ||BCL of Texas
|Address: ||2212 S. Congress Ave.
| ||Austin, Texas 78704
|Contact: ||Rosa Rios Valdez, Executive Director
|Web Site: ||http://www.bcloftexas.org
BCL of Texas has been working with town and counties across Texas to utilize community economic development funds. These funds are collected by cities and counties that are taking advantage of a Texas law which allows them to retain a portion of the local sales tax for community economic development purposes.
BCL of Texas was created by the Lower Colorado River Authority power cooperative in 1990 to expand business opportunities in small communities in central Texas. Initially, BCL of Texas offered only 504 loans through the Small Business Administration (SBA) to small business owners in 43 counties. Over time, BCL of Texas added new loan pools and expanded its loan products to better serve their customers and communities. BCL of Texas currently works in both rural and urban communities throughout Texas, primarily those along the Interstate 35 corridor.
The Product. In the mid-1980s, Texas passed a law that allowed cities or counties to – through a voting process – retain one-quarter of the local sales tax generated for community economic development activities. A large number of communities approved the referendums, which generated community income for Main Street projects, business recruitment and other economic development activities. Because the tax income is reserved in perpetuity for economic development activities, most municipalities used the funds for grant programs rather than dealing with recapture and reuse. After two decades of funding large economic development projects, towns found themselves with funds but no new projects. BCL of Texas sensed an opportunity to use its economic development expertise to support community economic development efforts in these small towns.
Planning. BCL of Texas approached six small towns with an offer to create revolving loan funds for micro-loans and small business loans within each community. Under the initial agreements, the municipality agreed to hire BCL for five years to administer and service the loan fund. BCL of Texas offered to match each customer loan from the local pool for five years. At the end of that period, both groups would have the option of severing or changing the agreement.
The Process. BCL of Texas staff does the underwriting and packaging of the loans at the local level for a flat fee. Local loan committees review and vote on the packages, which are closed and serviced by BCL. BCL of Texas’ executive director, Rosa Rios Valdez, says the organization is paid about $500 a month by each participating municipality for these services.
As the first five-year pilot agreements expired, Valdez went back to each municipality and offered to continue administering the loan funds, but without the capital match from BCL of Texas. Half of the towns decided not to continue the program without those leveraged funds from BCL of Texas, but the other half stayed with the program.
As word got out that BCL of Texas could be hired as an economic development consultant (with loan officers and administrators) other municipalities began approaching the organization for those services. One group is currently negotiating with BCL of Texas to administer an $800,000 Intermediary Re-lending Program loan pool.
- Offer Clear Goals. One of the biggest issues initially was transitioning municipalities from a mind-set of giving funds away to recapturing those funds by making loans. Somewhat surprisingly, the other issue BCL of Texas faced was helping municipalities to change their expectations from recruiting and bringing in established businesses to looking within the communities to create and support local entrepreneurs.
- Trust Rural Business Owners. Rural entrepreneurs tend to have a better repayment record on micro-loans than some of their more urban counterparts. Valdez attributes this to the close ties that exist in small communities and the willingness by community members to coach and support their neighbors and friends.
- Develop Strong Relations. Working with communities means developing good relationships with both municipal staff and elected officials. Valdez noted that most groups agreed to the partnership once they clearly understood the value of BCL of Texas’ services, which were substantially less costly than hiring an in-house community development professional.
- Conclusion: Developing an economic development consulting line of business enables BCL of Texas to use its expertise and capacity to generate fees without additional financial risk to the organization. The municipalities are responsible for generating additional capital and for any losses incurred on the loans they approve.
Interview in August 2007 with Rosa Rios Valdez, executive director